Lending Club Removes the Compare Feature

Last week Lending Club quietly removed a feature that had been present in their system for some time. You used to be able to compare your p2p lending portfolio with other investors but they have now taken that feature away (well not entirely – see below). But I think this is a good thing.

First, though, let me explain what I am talking about here. Below is a snapshot I took of my Lending Club Roth IRA account from a couple of weeks ago (on the left) and one from yesterday (on the right). You can see the lack of a compare link in the newer screenshot.

Lending Club Has Made a Good Move Here

I never liked the Compare feature. I think it was misleading for investors because of one key factor – it didn’t take into account the age of a portfolio. So someone with a month old account (and therefore no defaults) is compared with a similar account that is two years old. If both accounts are invested in the same grade notes then the newer account will almost always appear to be doing better.

Which brings me to my next point. It also didn’t compare you with investors who have a similar portfolio. If you were an investor primarily in the A- and B- grade notes then you were being compared to investors with much higher interest notes rather than with people who have a similar risk appetite. So, people who may have been doing reasonably well and were comfortable with their risk level always ended up with a lower percentile.

Here are two of my accounts with different investment strategies – you can see the very big difference in my investor percentiles.

I have chatted with Lending Club about this Compare feature several times and they agreed it was misleading which is why they removed it. I was hoping they would replace it with something better and that may be coming but it is not the case today. Here is an official response from Lending Club, which explains their reasoning quite well:

You can still access the compare returns page but because of the increasingly various and diverse investment strategies employed by our over 40,000 investors — we believe that the data provided on that page has become less relevant. The page compares one account (yours) to the platform average, rather than comparing your specific outcome to other investors with similar strategies and age of accounts. As a reference point, an investor who invests primarily in A Grade 36 month loans can expect a very different outcome than the platform average and should not feel they are returning “below average”.

I received emails and comments from many of you about this change (thank you) so feel free to add your thoughts below. What do you think? Is this a good move by Lending Club or should they have kept the Compare feature front and center? As always I like to hear your comments.

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Comments

Personally, I liked the feature (thanks for the link). As long as you understand that the more history you have, the more relevant it is. I do like your idea of more fine-grained analysis, but it does give those of us evaluating an idea of how well we are doing. For instance, if you are in the 10% from the onset, you probably need to learn some more strategies before investing more money.

I’ve always claimed that my 100% (and now 99%) have been luck and that the more experience I get, the more I expect to slide down the graph. It also helps you determine if it is a general market condition (recession) or a strategy condition (your strategy is getting worse). Of course it could just be a flood of new people causing your % to go down, but at least it is a benchmark, something, that we can use to get a feel for how we are doing.

@Marc, I agree that the Compare wasn’t completely worthless but I think unsophisticated investors may not have understood what it really meant. I took that to be a net negative and they have obviously agreed.

I kind of liked it, to be honest, and instead of taking it down, they could have made improvements (like adding filtering options so we could compare ourselves to people with accounts open roughly the same amount of time).

I’ll be the oddball here, I guess. That feature is, in my opinion, worthless at best and possibly detrimental to uninformed investors at worst. Really, who cares how you are doing compared to everyone else. It is this “keeping up with the Joneses” mentality that causes too many people to go so far in to debt because they’re living a lifestyle they can’t afford. Envy causes people to act in ways, ways that are irrational and harmful, they would not under normal circumstances. Instead of trying to figure out some newfangled ways to convince people they need to invest more and take greater risks, LC should focus on improving their UW to better price risk and eliminate defaults while increasing demand for loans. I don’t care how anyone else is doing. I only care if returns goes up and the risk/defaults go down. If they can do that, then I’m happy.

@Roy S, I agree with you as far as materialism. We shouldn’t want things because others have those things (especially if we don’t have the cash for them). However, competition helps us realize that we could do more. The only reason we have world class basketball teams is because we keep score and compare them (maybe football would have been a more appropriate comparison this time of year).

If I go out and get 5% and think I’m doing great, and then see that I’m actually underperforming, then I know that there is something I can do to get better. I can go out and seek the information (like from Peter’s awesome materials) to get better returns.

I agree that what they had (have but hidden) needs to be taken with a very large grain of salt, but it at least gives you an idea of how much you have to learn.

@Marc, I agree that competition is important, but it has its place. If everyone were going in with the same mindset of trying to achieve the highest returns knowing the full risks and consequences of their actions then I would have no problem with it. The problem arises when someone sees they are performing “poorly” when compared to everyone else not really knowing what that entails. As a result, they take on more risk chasing higher returns not really knowing the full risks of what they are doing because they haven’t done their due diligence. If LC’s feature causes their investors to do this and then perform worse or even lose money, then it is a problem and they should have rightly hidden the feature—I believe those who do their due diligence will discover this feature on their own (like through sociallending.net) even though it is hidden and so it poses less of risk of poor decision making based on it.

On top of all of that, the feature was crappy in that it didn’t take into consideration a lot of what Peter has already mentioned, which ends up giving a skewed performance of some investors. Are you really doing better than 98 or 99% of the investors on the platform? And would you still be performing better than 98 or 99% if everyone else were going in with the same competitive mindset as you. You might go and seek out the information to more finely tune your investment strategy, but I think that people like you are the exception rather than the rule. And in this scenario, more people will be driven by greed and envy rather than competition and knowledge to increase their returns. As such, I still dislike the feature, and I believe that LC did the right thing in at least hiding the feature from the casual investor.

@Daniel, I was a bit surprised, to be honest, when Lending Club took it down with nothing to replace it. In my conversations with them a few months back there was definitely talk of something better replacing it. My guess is that it is still on the development list.

@Roy/@Marc, In a perfect world people would understand exactly what this Compare feature meant and treat it as such. While I like competition, I think this feature could easily cause misleading assumptions which may harm investors. Better to keep it hidden and for the sophisticated investor keep the link live for them to use as they please.

It looks like the link you gave to the Compare feature no longer works. I wonder why they removed it completely.

I also noticed that they no longer list their overall return on their front page or anywhere else (unless I’m missing it somewhere). I wonder if this is related. It initially made me worried that their overall return had gone way down, which is why they stopped publicizing it, but I don’t see evidence of that in their overall statistics. Does anyone know about this?

@Ben, You are right – that link no longer works. I am not sure why but I have an email in to Lending Club about it and will update this post when I hear back.

This may well be related to the change in promoting overall return numbers. I know they stopped emphasizing their 9.64% overall return that they had been promoting for years. Now, they give a range of returns, you can see that in the ads on this blog.

Trackbacks

[…] It’s interesting to note if you look closely at the above screenshot, and my previous the “compare” link is no longer available. Lending Club removed this feature sometime in mid-December. You no longer can compare your performance to other Lending Club investors. I kind of liked this feature, but understood it was somewhat flawed. Peter Renton of the Social Lending Network has a post discussing the change in more detail. […]

[…] 62nd percentile. My returns are higher than 62% and lower than 38% of all investors. Note: The compare feature in Lending Club account is gone from your account page now because of some problems in how it’s calculated, […]

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